Rogers one of ‘a dozen’ seeking banking licence

So cable and wireless behemoth Rogers Communications Inc. wants permission to open a bank. That’s all well and good but Rogers is only one in a long list of would-be banks awaiting consideration by Canada’s financial regulator.

So far there are “roughly a dozen” such requests, according to a spokesman for the Office of the Superintendent of Financial Institutions, not all of which are public. And that’s not including Xceed Mortgage Corp., an originator of insured homeloans, which submitted its application back in 2009 but put the initiative “on hold” in November of last year.

Indeed, according to canadianmortgagetrends.com, OSFI has given the green light to just two companies looking to open schedule 1 banks since the start of the financial crisis: Walmart Canada and HomEquity Bank, a leading provider of reverse mortgages.

Rogers has suggested it wants the licence in order to become a credit card issuer, following in the footsteps of other big retailers. Such a step would not be that surprising and could even provide an incremental boost to profits.

But there could be more to it. Some observers say the company may be looking at launching a new payment system similar to initiatives underway in the United States and Europe where wireless customers are able to make purchases with their cellphones. Every year Canadians make more than $40-trillion of transactions and that generates huge profits for the handful of banks and financial firms that operate the payment system, and grabbing even a small slice of that business would be a major achievement.

Back in August a Federal Government task force issued a report arguing that Canada’s payment system is outmoded and that the country is “falling behind” as a result. The report, entitled “The Way We Pay”, devoted considerable space to the fact that the current payment system does not allow for smartphone transactions even though the practice is common even in developing countries. It also found fault with the concentrated ownership of the system.

The Canadian Bankers Association, whose members dominate the board of the Canadian Payments Association, responed with a submission criticizing the report for “lack of vigour” and various alleged “biases.”

So is Rogers aiming to shake up Canada’s cozy payment system? It’s way too early to tell. In fact, given the high level of scrutiny the regulator seems to be applying in its role as banking gate keeper, it may be several years before we learn the truth.